Contact Us
Mental Health
Financial advice
Youth Matters
Techno Corner
  Finance | Financial advice | Immigration | Special Needs | Accounting | Business | Labor Law | Asset Protection

Francis Vayalumkal

Most people enjoy receiving letters. What if the letter is to say that your home equity line of credit has been frozen because of the home's declining value? I am one of the many that received such a letter. Like many others, I had opened a credit line and had not used much of it but received the letter saying I couldn't use what was left on my credit line.

In recent years, homeowners have used their dwellings to obtain billions of dollars in extra cash through home equity products. However, plummeting real estate prices have forced lenders to trim, and sometimes freeze, home equity lines of credit, also known as HELOCs. Several lenders have stopped offering HELOCs and some that do have made it hard to get.

JPMorgan Chase, Washington Mutual, Bank of America, Wells Fargo and Countrywide Lending are among the big-name lenders notifying some clients that their home equity lines have been frozen. Many others have reduced their credit line offerings in big numbers.

With home equity loans, borrowers get money upfront in a one-time lump sum that is paid off over a set amount of time. The loans feature a fixed interest rate and the same payments each month. Hope equity lines of credit gives homeowners access to equity available in their house on an as-needed basis.

Since 2001, homeowners have obtained more than $2 trillion in home equity lines of credit and home equity loans, according to Inside Mortgage Finance, an industry newsletter. In 2006, borrowers tapped a high of $430 billion from home equity products. In 2007, borrowers tapped $355 billion, the first year equity volume dropped since the newsletter began tracking these products in 2001.

Lenders and secondary loan risk

Others lenders have made similar decisions because they view equity-backed products as far riskier than primary mortgages.

HELOCs and home equity loans are so-called "secondary mortgages" offered to borrowers who have a primary mortgage. When borrowers default and their home is sold to repay creditors, any money collected goes to lenders of the primary mortgage first.

That means lenders of secondary mortgages can wind up getting repaid far less than they loaned. In some cases, they may receive nothing at all. This added risk factor means lenders probably will continue to pull back on home equity offers as long as home prices keep falling. In many situations, when a lender freezes the HELOCs, it is to lender's and the homeowner's best interest. They want to make sure that the borrower doesn't owe more than his or her home is worth.

Borrowers must have more equity in their home to obtain HELOCs, which are now generally set so the loan, combined with the primary mortgage, exceeds no more than 85 percent (varies by company) of a home's value. Several companies have had programs in place for years that increase, decrease, block and suspend credit lines based on an number of factors, including a customer's entire relationship with the bank, their payment status, changes to their credit standing and changes in the value of their property. Companies have increased the frequency at which they check the value of the house versus the loan amount.

Solutions to a frozen HELOC

If your HELOC is frozen, take the following steps to keep the cash flowing:

" Appeal the lender's decision.
" Search for other lenders who may offer HELOCs.
" Amass emergency cash reserves.
" Reduce spending on luxury items.

I have come across several situations where the bank was willing to reconsider the decision and with proper documentation to show the value of the house is higher than what they assumed. They might just have to reduce the credit line instead of freezing it completely. This might require getting an appraisal from the bank's approved appraiser. If you truly believe there is value in the property, it will be worth the try.

Another option is to go to a different lender for a HELOC. The fact that an existing credit line was frozen should not affect someone's ability to borrow elsewhere. What matters is how much property borrowers own outright.

Modest expectations also help. Borrowers who seek a credit line up to 100 percent value of their homes don't stand a chance of getting it in today's tight market. But if you apply for up to 80 percent of their home value, and you've got sufficient equity, you've an excellent chance of getting it.

Homeowners who can't convince their lender to reconsider a freezing a credit line - or who simply can't secure a HELOC from anybody - will have to try new strategies to free up extra cash.

Homeowners whose credit lines have not been frozen should count themselves fortunate. It's important to use these tools wisely, especially in a slowing economy. Pay off high-interest debts with them, but don't blow them on pricey luxuries you can save for instead. In general, try not to use your home as a means to get out of a financial jam.

If you have an equity line that has been frozen or if you are looking to use some of the equity you have in your home, I would suggest you talk to some one you know and trust in the mortgage or banking industry to get an opinion on what your option are.

Francis Vayalumkal is a mortgage banker with Regions Bank and can be reached at (813) 719-0303

Finance | Financial advice | Immigration | Special Needs | Accounting | Business | Labor Law | Asset Protection

Nitesh Patel

After watching the powerful images and later learning about the economic and social impact of recent natural disasters here and abroad, many of us instinctively dug into our wallets and made donations. According to Giving USA, charitable donations rose 6 percent in 2005 to more than $260 billion, fueled by disaster relief giving. (Giving USA Report, Giving USA Foundation - June 2006)

Yet, if you're like many Americans, it probably seems as if whatever you donate won't be enough to make a real difference in these situations. Will your $25 or $50 or $100 really help?

The answer is 'yes'. Although corporate foundations give millions each year, individual giving continues to be the largest single source of donations, accounting for over three-fourths of all charitable giving in 2005. (Giving USA Report, Giving USA Foundation - June 2006). Representatives from most charitable organizations would agree that even the most humble gift is appreciated and does help.

The good news is that you don't need to be wealthy to achieve your philanthropic goals and support a favorite charitable organization or a cause that's close to your heart. One long-term strategy that can effectively reach your philanthropic goals is giving the gift of life insurance. The gift of life insurance is an affordable and flexible way to maximize your contributions to help you to leave behind a legacy for future generations.

There are several ways to structure a gift of life insurance, but the end-result remains the same - the organization benefits. As the beneficiary of a life insurance policy, a charity receives proceeds on a tax-free basis upon the donor's death. Either the charity or a donor applies for a permanent life insurance policy on the donor's life and names the charity as both the owner and beneficiary of the policy. The donor's gift of the annual premium is income tax-deductible since the charity is the owner.

For those who want to maintain control and access to a policy's cash value without an income tax deduction, but still have the charity receive the insurance proceeds at death, the donor may retain ownership of the policy and simply name the charity as a beneficiary. Either way, you're able to leave your mark on a cause you believe in through life insurance.

Another more immediate strategy to support a non-profit organization is to make a charitable distribution from your IRA. A recent tax law change (Sec. 1201 of the Pension Protection Act of 2006 and Sec. 408(d)(8) of the Internal Revenue Code of 1986, as amended) allows tax-free "gift" distributions.

Previously, if an individual wanted to take funds from an IRA to give to a charity, he or she would be required to first take distribution of the funds, which were fully taxable as ordinary income. This could create quite a tax burden. The new law allows IRA owners age 70˝ or older to give up to $100,000 directly to the charity.

For some donors, these gift strategies may be the answer to "what else can I do?" The bottom line is that supporting a charity or organization you believe in -- either through the gift of life insurance or gift distributions from qualified retirement accounts -- is an easy way for you to leave your mark. All it takes is a simple call, a little paperwork, and a heart that wants to make a difference.

Nitesh Patel is a financial representative with the Northwestern Mutual Financial Network based in Clearwater for The Northwestern Mutual Life Insurance Company, Milwaukee, Wisconsin). To reach Patel, call (727) 799-3007 or e-mail

Finance | Financial advice | Immigration | Special Needs | Accounting | Business | Labor Law | Asset Protection

Kamlesh Patel


Here's a quick review of some recent IRS rulings and news releases.

- Business vehicle depreciation limits. For business cars first placed in service in 2008, the first-year depreciation limit is $10,960 if the car is new and $2,960 if the car is used. The $8,000 difference is due to bonus first-year depreciation on new vehicles provided in the 2008 economic stimulus legislation. For both new and used business cars, the limit for year two is $4,800, for year three $2,850, and for each succeeding year $1,775. For trucks and vans, the first-year limit is $11,160 for new vehicles and $3,160 for used vehicles. Year two depreciation for both new and used trucks and vans purchased in 2008 is $5,100. For year three, the limit is $3,050, and for each succeeding year, the limit is $1,875.

- The 2008 "Dirty Dozen." The IRS has published its annual list of the most flagrant tax scams being promoted by con artists. Topping the list is "phishing," schemes on the Internet used to trick unsuspecting victims into providing personal and financial information, which is then used to access accounts, run up credit card charges, and apply for loans or credit in the victims' names.

Scams related to the economic stimulus payments also were high on the list. In these scams, criminals pose as IRS representatives asking victims for personal financial information, saying this information is needed in order for the individuals to receive their rebate checks. (The IRS reminds taxpayers that it does not contact taxpayers by phone or e-mail about their stimulus payments.)

- Reminder on political activity. The IRS is reminding tax-exempt organizations, such as charities and churches, that it is against the law for them to engage in certain activities "on behalf of (or in opposition to) any candidate for public office." As the presidential election nears, the IRS wants 501(c)(3) organizations to be aware that they could lose their tax-exempt status if they engage in prohibited activities. More information on this topic can be found at


Are you frustrated by employee absenteeism and the negative impact it has on your operations, customer support and profit level? Are you looking for ways to improve the attendance and productivity of your workers? Here are a few suggestions.

- First, realize you can make a difference. The situation is changeable. If you take proactive steps, attendance can improve.

- Let your employees know you care about them. Stress and personal responsibilities are part of life for your employees. Let them know you understand and appreciate their dedication.

- Lead by example with your attendance. Demonstrate the personal discipline and commitment you hope to instill in your workers.

- Emphasize the link between attendance and productivity. Ensure that all employees understand the importance of the role they play in the success of the business. Explain the impact absenteeism has on the rest of the team and your customers.

- Learn what motivates your employees. Consider a survey to learn if money, recognition, promotion or time-off drives your employees.

- Consider job enrichment. Cross training and job rotation can improve employee appreciation for the overall business and mitigate the impact of employee absences.

- Create a bank of personal time days. Modify the traditional assortment of vacation, personal and sick time days. Consider empowering your employees to manage their total time bank. It gives them the responsibility and the ability to balance their work and home obligations.

- Prize pool. Consider modest but visible awards for punctuality and attendance.

- Make work more fun. Are there ways to make coming to work more fun and enjoyable? A healthy working environment has room for celebrations and team building.

Try these suggestions to increase the time your employees spend at and on your business. They'll appreciate the effort and you'll profit from their improved dedication and performance.


Are you frustrated by the amount of time you spend managing your financial affairs and by how complicated your finances have become? Maybe you need to simplify. Not only can simplifying save you time; it can reduce uncertainty and save you money.

A fundamental step to simplification is to focus on what's important. Decide what your financial goals are, and focus on achieving them. Here are some specific tips to help simplify your financial life.

- Reduce the number of accounts you handle. For example, if you have more than one checking account, consider consolidating. Ditto for your brokerage accounts, retirement accounts, and credit cards. If you have separate mutual fund accounts transfer them into a brokerage account. Besides reducing the volume of financial data you handle, consolidating allows you to more easily evaluate your financial position. It also can save you time and money at tax time, and it could cut annual fees.

- Minimize the time required to monitor your investments. If you spend significant time following the rise and fall of your individual stocks, consider keeping more of your portfolio in mutual funds. If you spend too much time monitoring your mutual funds, consider cutting back on the number of funds you own.

- Set up a simple filing system to eliminate clutter and make documents easier to find.

- If you're not already using the computer for your financial affairs, consider doing so. Several popular personal finance programs can simplify bill paying, keep track of tax deductions and other expenses, and help evaluate your investment performance.

Take a few moments now to simplify your finances; then relax and enjoy the extra hours you have created for yourself.

Kamlesh H. Patel, CPA, can be reached at (813) 949-8889 or e-mail or

Finance | Financial advice | Immigration | Special Needs | Accounting | Business | Labor Law | Asset Protection

Satya Shaw

A successful retirement does not just happen; you have got to plan for it. The long ramp toward retirement focuses on saving and investing, but once retirement starts emphasis shifts to spending and safeguarding. Even though the greatest challenge in retirement, and probably your greatest fear, is outliving your money, most people spend less time planning their retirement than they do planning a vacation.

What does retirement planning involve? Here are the steps: First, determine what you would ideally like to do in retirement, and then discuss it with your spouse and other loved ones. Will you spend your time traveling, enjoying hobbies, helping others, working part time, or what? Second, estimate the retirement income you'll have from savings, Social Security, pension and all other sources. Third, estimate your expenses making sure to take account of inflation, taxes and health care costs, which are likely to be an increasing part of your budget.

Steps two and three should be done for each five-year period of your retirement and then revised annually. Fourth, if you have more income than needed, you only need to safeguard your investments to make sure they're not lost or shrunk by bad decisions. If you have insufficient money for retirement (expenses exceed income), then you'll need to postpone retirement, work part-time or possibly use a Reverse Mortgage to access the equity in your home. Either way, it is highly recommended that you minimize your exposure to loss and maximize the full potential of your financial resources by working with a financial adviser. They can help you determine the risk you can afford, investment options and how to position your money for best results without sacrificing safety. Retirement is going to be long, filled with uncertainties, including emergencies, and going it alone is one of the greatest risks you can take.

Be realistic in your planning. For example, be aware that for a couple age 65, there is a 50 percent probability that one will live beyond age 90. Acknowledge that even a low rate of inflation can make a big difference in prices over the 20 to 30 years you'll be in retirement. For example, average inflation of 3 percent means $1 today will be worth only 55 cents in 20 years and 41 cents in 30 years. Since 78 million boomers are entering retirement over the next two decades, the price of everything related to retirement, especially health care, is likely to rise faster than overall inflation. Inflation is a cruel tax for those on fixed incomes, and chances are your income in retirement will increase a lot slower than prices.

The boomer explosion is going to overwhelm government-provided services and benefits. This means that the relative benefits of Social Security and Medicare are going to shrink under the pressure of increased retirees. There will simply be more people receiving entitlement benefits than workers paying the bills. Every study, government and private, indicates there will be a shortage of money to support these programs. To pay for this shortfall, the government must raise taxes of all types. The increased taxes, inflation, relative decrease of benefits combined with escalating medical care costs will be especially burdensome for those in retirement without rising incomes from wages and salaries.

If you haven't evaluated it yet, investigate the risk you're taking with your retirement money. Would you have a loss if the stock market lost ground? You might if your money is still in your ex-employers 401(k) plan, or if you own securities, even mutual funds, whose value is determined by the market. Generally, investments in stock have done well long term, but you may need your money before a long time. From November 1973 to October 1974, the S&P stock market index fell 48 percent, and it took over six years to recover. The last bust in the stock market was 2000-2002, and we have yet to fully recover. In the meantime, inflation marches forward with the shrinking dollar purchasing less. Much of your income in retirement is likely to be derived from your savings and investments, and you simply can not afford risk of loss and the compounding of inflation. If you lose some or all of your retirement money to bad investments, you'll increase dramatically your chances of realizing your greatest fear: outliving your money.

How do you safeguard against the challenge of too many years and not enough money? Like law and medicine, financial planning is best left to professionals. Your job in retirement is to enjoy life free of investment worries.

Satya B. Shaw, CPA, can be reached at (813) 842-0345.

Contact Information
The Editor:
Send mail to with questions or comments about this web site. Copyright © 2004 Khaas Baat.

Anything that appears in Khaas Baat cannot be reproduced, whether wholly or in part, without permission. Opinions expressed by Khaas Baat contributors are their own and do not reflect the publisher's opinion.

Khaas Baat reserves the right to edit and/or reject any advertising. Khaas Baat is not responsible for errors in advertising or for the validity of any claims made by its advertisers. Khaas Baat is published by Khaas Baat Communications.